Southwest Airlines plane. Credit: Diego M. Radzinschi/ALM
On the heels of several significant Employee Retirement Income Security Act ERISA class settlements in 2024, Southwest Airlines was hit with a class action lawsuit, alleging it breached basic fiduciary duties under ERISA and violated its fiduciary duties by mismanaging the company’s Retirement Savings Plan, after 15 years of “chronic underperformance,” according to an announcement yesterday from Sanford Heisler Sharp McKnight. The law firm filed a lawsuit in the U.S. District Court for the Northern District of Texas on behalf of the plaintiffs.
In December 2024, Sanford Heisler filed for preliminary approval of a record $69 million settlement in its multi-year class action against UnitedHealth over “low performing” 401(k) funds. In 2023, the law firm also obtained final approval of a $61 million settlement in a long-running ERISA class action against General Electric. These settlement amounts are believed to be the largest ever of an ERISA case, stemming from poorly performing investment options in a 401(k) plan, according to the law firm.
Recommended For You
The latest Complaint, Anderson et al v. Southwest Airlines, alleges that Southwest failed to remove from the Plan the Harbor Capital Appreciation Fund, an investment option with over $2 billion in plan assets that has “significantly” underperformed its investment benchmark and similar large cap growth funds for over 15 years.
Southwest selected the Harbor Capital Fund as a plan investment option on or before 2010, according to the Complaint. By December 2018, the cumulative investment performance of the Harbor Capital Fund lagged its benchmark – the Russell 1000 Growth Index - over the preceding three, five, and nine years. It also underperformed other large cap growth alternatives over the same periods. “By late 2018, any prudent fiduciary would have recognized that the Harbor Fund was a terrible encumbrance to the Plan and should have been removed,” according to the lawsuit.
Yet, Southwest took no action to replace the Harbor Capital Fund, and its underperformance continues to this day, according to the suit. The decision not to remove the Harbor Capital Fund has cost the Southwest Retirement Savings Plan millions of dollars in retirement savings, according to the law firm.
The two named plaintiffs, Arthur Anderson and Manuel Rivera, filed this case on behalf of the Southwest plan which has approximately 60,000 participants and $14 billion in assets.
“Plan participants have invested over $2 billion in the Harbor Capital Fund. As fiduciaries to the Plan, Defendants are obligated to monitor the plan to ensure that all investments are prudent,” said Charles Field, partner at Sanford Heisler Sharp McKnight and counsel for plaintiffs and the proposed class. “With the Harbor Capital Fund, this obligation is especially critical because this one fund makes up 17% of the plan’s assets. We believe the Southwest Defendants neglected their sacred fiduciary duties.”
Related: General Electric will pay $61M in ‘largest ever’ 401(k) mismanagement suit
“As fiduciaries of the plan, Defendants are duty bound to monitor the plan’s investments continuously and remove imprudent ones,” said David Tracey, a partner at Sanford Heisler Sharp McKnight and counsel for Plaintiffs and the proposed class. “It is precisely that duty that this complaint alleges the Defendants have breached by failing to remove the Harbor Capital Fund. Cases like this are a critical tool for ensuring retirement security for employees.”
Plaintiffs are seeking repayment of the Plan’s financial losses, removal of imprudent investments and the removal of the fiduciaries who have violated their duties to the Plan’s participants and beneficiaries under ERISA.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
